tv Nightly Business Report PBS December 26, 2012 4:30pm-5:00pm PST
>> this is n.b.r. >> susie: good evening everyone. i'm susie gharib. tom hudson will be along a little later in the program. ho-hum sales for the nation's retailers this christmas, ringing up the worst holiday season in four years, we talk with a top retail analyst. president obama and congressional leaders cut their vacations short, to deal with fiscal cliff negotiations. they have five days to make a deal. and housing continues to be the bright spot in the u.s. economy: home prices post their biggest advance in two years. that and more tonight on "n.b.r."! christmas may be over, but the holiday shopping season continues. many consumers hit the malls
today to return gifts and buy what they really wanted. and this is the time many gift cards get redeemed. but for retailers, holiday sales so far have been a flop. sales in the two months leading up to christmas, rose just 0.7%, according to mastercard advisors that tracks the numbers. that's way below what the retail industry was predicting. erika miller spoke with retail expert dana telsey and began by asking what happened. >> i think there were a confluence of events, extra long season. hurricane sandy. tragedy in ct. >> none of the events out there were feel good factor events. it was all for consumer morale. >> when you look at the weakness this holiday season, how much of the blame do you put on retailers for not having inspiring merchandise and how much of it are just factors beyond their control like the
economy and the fiscal cliff? >> i think overall it was more probably 70 to 80% factors beyond the retailer's control. i think retailers had creative merchandise but i think the news didn't lead to a feel good factor. >> in any economy, good or bad, you always have some winners. who did really well this year? >> well, it looks like in terms of who did well so far, companies like american eagle outfitters limited, michael cors, macy's' tj and i would say costco was also a winner. >> on the flip side were there retailers that you had high hopes for going into the season but just didn't deliver in the end. >> certainly we will see some becoming more promotion al, some of the children's retailers, whether it was impacted by weather or there was competitive price and they did a good job at it, the children's retailers seemed to have a tougher season this year. >> now is the time of year when we shift into gift card sales.
what most people don't realize is those sales get counted until the cards are redeemed. is that enough to save the season? >> not totally but you will have a decent season. around 70 percent of all gift cards are typically redeementd in the month of january. on average you will get consumers buying for themselves. they will take the gift card and add ton to it. that will be interesting in january to see if that happens. >> are there any retail stocks that you would get in and buy now. >> >> i think there are names as we look to 2013, whether it's van hues and the changes they are make to werner will be interesting. the continued growth with victoria's secret and bath and body works we will continue to see strength in michael cors as they expand their categories. you mentioned the overhang of the fiscal cliff, if that is resolved, will we see shoppers rush back to the malls. >> i wouldn't say rush but i think they will have more confidence in coming back to the malls and that will help us for
easter, the march-april time period. >> dana telsey attach e. thank you very much >> susi on wall street, a gloomy start to post-christmas trading. stocks fell on those disappointing retail numbers, and more worries about getting a fiscal cliff deal in time. we'll have more on that in a moment. the dow fell almost 25 points, the nasdaq lost 22, and the s&p off six points. but more good news about housing today: home prices posted their best year-over-year growth since 2010. the closely watched s&p case- schiller index rose 4.3%, in october, beating expectations. looking at month over month performance, the 20 city index fell 0.1% from september to october. still, s&p is optimistic about housing activity in the new year. >> 2013 should be a good year for housing, we're going into the year with a whole lot of momentum, we've seen very strong housing starts, very strong construction in 2012 but even with that strength construction
is still way below where it should be and we have a lot of lost ground to make up. >> susie: david blitzer also expects home prices to continue to improve through the end of next year, and he bieves that rebound in prices will help he u.s. economic recovery. still ahead, the outlook for stocks in 2013, we're joined by wayne kaufman, he's the chief market analyst at john thomas financial. president obama is due back in washington tomorrow, cutting short his hawaiian holiday vacation. he will be meeting with congressional leaders for one last push to prevent the economy from falling over the fiscal cliff next week. no specific bill is on the schedule in the senate or the house, and house republicans haven't yet called their members back to washington. and hopes for a deal by the december 31 deadline are fading. darren gersh reports. >> reporter: the odds of avoiding the fiscal cliff did not get any better over the holiday. staff discussions continue, but
there were few signs much, if anything has been accomplished. the house isn't even scheduled to return to washington yet, leaving it up to the senate to act. >> this is a senate that is incredibly divided, hopelessly partisan, requires 60 votes to do anything and somehow, we are going to be relying on them to in five days, come up with a compromise which is acceptable where a compromise wasn't acceptable in four years. >> reporter: it now looks like some kind of fall over the cliff is the likeliest scenario. and depending on how long it lasts, it could signal a prolonged fight over the debt limit that could spook markets again in february. >> the republicans are going to be defeated coming out of this fiscal cliff fight. and i think that they are just not going to go along with raising the debt ceiling unless they get something for it. and if the president is not prepared to give them something, then it's going to be really hard to see a way out of that. >> reporter: if congress does not act before the end of the year, the public's reaction will determine how fast congress moves to fix the damage.
>> what forces action after we pass the deadline is the public reaction to it. and so i think the big question is going to be what happens in the real economy, how frustrated are average americans that their paycheck is meaningfully smaller? and if that is a massive reaction, then they'll get a quick response. >> reporter: while u.s. markets have been fairly weak lately, they have not yet registered true alarm at the prospect of deadlock in washington. it seems many investors see the fiscal cliff as a slope that will only gradually impact the economy. but washington analysts believe investors may be underestimating the prospect 2013 will roil the economy with a series of fights over taxes, government shut downs and debt limit increases. >> i actually had one hedge fund manager say to me, "oh, they'd never allow to go over the cliff, because they, they being members of congress, would be embarrassed by this. and i don't think wall street understands what it actually takes to embarrass a member of congress on the kinds of issues.
>> reporter: if an agreement isn't reached by january 3, the new congress will have to deal with the problem, potentially delaying action even further. darren gersh, "n.b.r.," washington. >> susie: our guest tonight is bullish for 2013. he's wayne kaufman, chief market analyst at john thomas financial. >> so, wayne, give us your bullish case. make the case for us for why you see the dow and the sep up by as much as 12% in 2013.
>> well, i do think there's a very good chance that the major index is the s&p and the dow make new all-time highs, sometime in 2013. you have been going over the housing market doing much better but the entire construction industry, the whole building sector is also doing a lot better. there's something called "the architect's work on the boards index" and that shows the architects making at all-time highs. automobile is better, payrolls are better, the jobless claims are improving and, based on that, the consumers' ability to pay their debts is at the best levels that it has been at since the 1980's and that's very important, with the consumer being 70 percent of the economy. gdp for third quarter was 3-point 1% which was a big
increase over second quarter. in addition to this you have a synchronized global program of asset buying by central banks around the world. you have the fed and you know, they always say don't fight the fed. you have the ecb. you have the government in china. so if don't fight the fed works then you don't want to take on all of these central banks. and market action has been showing this. when the year closes here, we're going to see new all-time yearly closing highs on the small-cap index, on the midcap index and on the dow transportation index. those are yearly closing highs. the nasdaq -- >> ok. >> excuse me? >> go ahead. i want to jump in and ask you, so you're talking mostly here about equities, for investors who have money in bonds, should they be now transferring money into equities or do you still see that it makes sense to keep some of your money in treasures and other bonds? >> it depends on the investor.
if the yield is important to them as income and they won't need to sell their bonds before maturity, then i say hang on to them. i'm not one of those people who thinks that bonds are going to take a big drop. i would be skeptical of trying to play it tactically which means by some bond and then you look to sell them quickly, i wouldn't be doing that. but an investors who -- >> ok. >> an investor who invests in the bond income i wouldn't have a problem with them still being in the bond market. >> wayne, you know everybody on wall street and in washington is talking about this fiscal cliff. if the negotiations carry over into january and stocks sell off, would you still be this bullish or are you going to change your forecast? >> i will still be this bullish and i think the odds say that is going to be a buy be opportunity. i think the only thing that surprises me about this is the amount of people who are
surprised that there hasn't been a quick resolution to this. these types of negotiations always go down to the wire. plus there's some easy fixes that they can make in january. for example, they can let all of the rates go up and then they can do a quick vote to lower rates on the lower 98% which will leave a higher rate on the top 2%. they can do this quickly can take will get republican support. my question at that time would be, for the democrats, is that a fair share? will they finally say, yes, this is now the fair share? other than that i'm just worried about policy mistakes and the biggest ones for me would be if they let a tax increase be across the board for everybody and, in the energy area, if take really come down hard on fracking which has been a very important asset for our country. >> all right, sorry we have to leave it there. an interesting conversation. thank you very much wane. best wishes for the new your. wayne kufman of john thoma
fiancial thanks a lot >> susie: the fiscal cliff isn't the only drama playing out for the u.s. economy: there's also the "container cliff". 14 ports along the u.s. east and gulf coasts are at risk of closing if longshoremen and the international maritime alliance cannot reach a deal by saturday. federal mediators have been called in to help with last minute negotiations. at the heart of the dispute: container royalties. those fees charged to shippers were implemented in the 1960s to help dock workers displaced by technology. the maritime alliance wants the
royalties capped. earlier this month a port strike in southern california, cost an estimated $1 billion a day. netflix is blaming problems at its web service provider, amazon for a server outage that took down its streaming video service on christmas eve and into christmas day. netflix says it worked through the night with engineers at amazon to get the service back up and running. netflix shares rebounded today, rising almost 2%, while amazon shares fell nearly 4%. >> susie: amazon was just one of many stocks in the red today. as we mentioned earlier, stocks were dragged lower by the retail sector after a report showed consumers did not go all out this holiday shopping season. that sent shares of some of the nation's largest retailers lower. macy's fell 1%. upscale retailers coach and saks were hardest hit. walmart and best buy were also modestly lower. volume improved a bit from monday but was still light with many traders still on vacation.
no surprise, consumer related stocks were some of the weakest performers in today trading. consumer discretionary and consumer staples each slid about 1%. a similar drop for utilities. a few court decisions out today. a win for wells fargo in a california court. a judge ruled the bank does not have to pay customers $200 million in a lawsuit stemming from the bank's overdraft policies. despite the good news, shares of wells fargo slipped a fraction, but they are up nearly 25% this year. shares of marvell technology took a hit today. a federal jury ordered the company to pay more than $1 billion in damages to carnegie mellon university as part of a patent infringement lawsuit. shares fell more than 10% to five-week low. toyota has agreed to pay more than $1 billion to settle claims that its cars suddenly and unintentionally accelerated. the settlement will include direct payments to customers as well as the installation of new brake systems in about three million vehicles.
the automaker also said that 2013 will look much like 2012. it expects to make about 8.7 million cars and trucks next year, that's about the same as what it produced this year. shares ended the session fell 1% to $90 and change. over the past year, shares are up nearly 40%. it's looking to be a boom yr for starwood hotels. the hotel chain says it expects to open 71 new hotels before the new year, and it's signed more then 125 new hotel management agreements, that's the most since before the global financial crisis. the stock was down today, but it's up 18% for the year. turning to tech, shares of research in motion rebounded from a one month low. the company's next generation blackberry-10 product line is expected to be unveiled in just a few weeks. you may remember shares sold off last week after the company issued a cautious outlook for its fourth quarter results. but today shares bounced back: up 11.5% to a under $12.
in the energy sector, a possible partnership between china's sino-pec group and conoco-phillips, to explore vast reserves of shale gas in southwestern china over the next two years. shares of conoco showed little reaction, off just a fraction. and turning to gold, prices rose modestly on cautious optimism the fiscal cliff may be averted. gold rose a $1 and change to settle at $16.60 an ounce. settle at $1,660 an ounce. for the year, it's up 5%. and finally it was another down day for most of the most actively traded e.t.f.s. the lone gainer was the ishares emerging markets e.t.f. and that's tonight's "market focus."
>> susie: one of the keys to a company's success is good leadership. for the past few years dartmouth business professor sydney finklelstein has been tracking the nation's worst c.e.o.'s. tom hudson recently spoke with him, and begins our three-part look at the nation's worst chief executives, and why they made finkelstein's list. >> school of business at dartmouthith us tonight in new york. sydney, nice to see you and welcome. you have four of the worst c.e.o.'s of the year, beginning with number 4, mark pincus, manager of zynga that relies on facebook for its success. what brought mark to your list. >> facebook and zynga announced they would go their separate ways and no longer be tied in
and you can guess who that will affect more, facebook or zynga. one executive manager after anotheras lftnd that is always something i have seen as one of the reason warnings signs of something going wrong. along the way acquisition was made for $180 millujjy didn't take them more than half a year to write down 50% of the value of that acquisition. so it really look like a company that is floundering and mark pincus along the way ended out cashing out as quickly as possible raising eye browse in the possible. >> to the makeup industry and fashion. andrea young, the former c.e.o. of avon, still the chairman. this company rejected a buy outr offer earlier in the year when the share price was closeñi to 3 where it is now. is that why she is on the list. >> the s.e.c. u.s. department of justice are investigating the company for potential violations of the foreign corrupt practices act. business in china not
coincidently is way, way down. it's really a company where andrea young'sñi skillset, which is around marketing and branding, which stood them in good stead for a long period of time is no longer really the right skill set and the problems are operational. >> it was a different scandal at energy company chess apeek energy with its c.e.o. aubry mcclendon. he gave up chairmanship position this year. gas prices for week end and borrowing hurt the year end business but he got in trouble for minuting personal and business together on the company's balance sheet. >> this is a guy that just can't keep his own personal business affairs separate from the corporate affairs for which he was the c.e.o. and now the chairman. , for exampl this year he borrowed half a billion dollars from aig global partners. personal loans from a company that you're working with as a major player in had a corporate setting is just ripe with the
potential for conflict of interest. of course he also had $200 million hedge fund he was running on the side, fully disclosed by the way but how is it a c.e.o. is running a hedge fund at the same time the c.e.o. of a company? >> let's get to your number one worst c.e.o. of the year, who is no longer a c.e.o. and retail giant best buy, bryant dunn. this company obviously has been dealing with sales declining for many, many years and then you also have a scandal in your own right here with mr. dunn this year. >> he is focused on cross selling and up selling, rather than dealing with amazon, he has not come up with any solution to that and it's well-known best buy is a showroom for amazon. people go there, check what is there and go a lower price. the scandal you're referring to is one that 1 becoming all too familiar in corporate america and that is a -- an alleged affair with a 29-year-old subordinate and there's not a single metric you can look at for best buy that gives you a
lot of confidence in the future of the actual core of the business. and bryan dunn c.e.o. is responsible for that. >> your top four worst c.e.o.'s of 2012. cindy finkelstein put the list together with dartmouth. thank you. >> >> susie: tomorrow we'll look at two leaders, who almost made sydney finkelstein's list of worst c.e.o.s. for more on executive behavior, head to: www.nbr.com, our "nbr- u" partners at vanderbuilt have research on the six mental mistakes eve leader makes. tis the season for making predictions. what will stocks do next year, how will the economy fare? and, what will be the nation's top spice or flavor? believe it or not, spicemaker mccormick and company issues an annual "flavor forecast," designed for restaurants and homes. suzanne pratt met with the man behind the tastes, mccormick's top chef, and got a close-up "smell". >> reporter: here's how american's spiced up their cooking in the past, a lot of salt, a dash of pepper and easy on the garlic.
but, u.s. palates are expanding, and now include everything from smoked paprika to dukkah. that's right dukkah, what mccormick executive chef kevan vetter thinks will be a big hit with american tastebuds in the next few years. >> the dukkah is a spice blend made up of toasted nuts and toasted spices, very rich and savory. it's got a very rich texture aspect to it combination. the trend here that we're talking about is empowered eating. people are trying to be more thoughtful about what they're eating and make better choices. you know dukkah is a great example of something that could translate into the world of snacks, so making a dukkah flavored snack cracker. you may not see broccoli attached to that, exactly, exactly. but dukkah is an example of a great flavor that could move into the other world of food away from a restaurant or a sprinkling on. that's a great example of a flavor that could go above and beyond.
>> reporter: in case your wondering about mccormick's savory success rate. nearly a decade ago, it correctly predicted americans would fall in love with chipotle. >> we talked about chipotle in 2003 when most people couldn't pronouce chipotle, and since then we've seen over a 900% or almost a 900% increase in new product launches with chipotle in grocery stores. that's incredible. for us it's been a great seller, we've seen a 40% increase in chipotle sales over the past few years. >> reporter: so where does the u.s. fall on the world's spice spectrum? >> india is the highest per capita consumption of spices. whereas in the u.s. our spice consumption is about a billion pounds per year, which is actually increasing significantly over the years. i think in the u.s. we're definitely becoming more comfortable and oriented to cooking with spices. >> reporter: but in the scope of the world where do we stand on a scale of one to 10? >> in the scope of the world i
don't want to put us right in the middle, but i think that other countries play it a little safer as it come to herbs and spices. i think we're getting a bit more adventurous than we have in the past and happy to see that. >> reporter: mccormick management is happy to see that o. it turns more adventurous cooks lead to more spices and flavorings in pantries. on top of that, americans are eating home more to save money, and looking for new ways to spice up their life. suzanne pratt, "n.b.r.," new york. >> susie: and finally tonight, starbucks is hoping to harness the power of caffeine to influence negotiations going on over the fiscal cliff. employees at the chain's 120 stores in the washington d.c. area, are writing the phrase "come together" on the side of cups, alonwith customer drink orders. starbucks c.e.o. howard schultz calls it a small but powerful gesture, designed to urge our elected officials to come together to reach common ground on the fiscal cliff. that's "nightly business report" for wednesday, december 26. have a great evening everyone.